Financial Discount Rates in Project Appraisal (Suat Chiet Khau Tai Chinh Trong Tham Dinh Du an) (Vietnamese Version)

Financial Project Appraisals Working Paper No. 005-2003

43 Pages Posted: 8 Sep 2003

See all articles by Joseph Tham

Joseph Tham

Educational Independent Consultant

Tran Viet Thang

SAIGON COMMERCIAL BANK (SCB); affiliation not provided to SSRN

Date Written: August 20, 2003

Abstract

In the financial appraisal of a project, the cashflow statements are constructed from two points of view: The Total Investment (TI) Point of View and Equity Point of View. One of the most important issues is the estimation of the correct financial discount rates for the two points of view. In the presence of taxes, the benefit of the tax shield from the interest deduction may be excluded or included in the free cashflow (FCF) of the project. Depending on whether the tax shield is included or excluded, the formulas for the weighted average cost of capital (WACC) will be different. In this paper, using some basic ideas of valuation from corporate finance, the estimation of financial discount rates for cashflow in perpetuity and single-period cashflows will be illustrated with simple numerical examples.

Note: Downloadable document is in Vietnamese. The English version is available to download at: http://ssrn.com/abstract=204010

Keywords: cost-benefit analysis, capital budgeting, project evaluation

JEL Classification: D61, G31, H43, M40, M46

Suggested Citation

Tham, Joseph and Thang, Tran Viet and Thang, Tran Viet, Financial Discount Rates in Project Appraisal (Suat Chiet Khau Tai Chinh Trong Tham Dinh Du an) (Vietnamese Version) (August 20, 2003). Financial Project Appraisals Working Paper No. 005-2003, Available at SSRN: https://ssrn.com/abstract=437002 or http://dx.doi.org/10.2139/ssrn.437002

Joseph Tham

Educational Independent Consultant ( email )

Tran Viet Thang (Contact Author)

SAIGON COMMERCIAL BANK (SCB) ( email )

4- HO XUAN HUONG
Hanoi, 10000
Vietnam
084-04-9438732 (Phone)
084-04-9438734 (Fax)

affiliation not provided to SSRN

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